Consumer products maker Clorox Co. said Wednesday that fiscal second-quarter earnings fell 7 percent as retailers cut inventory, consumers spent less and a stronger dollar made the company's products more expensive to overseas customers.
Clorox also lowered its fiscal 2009 sales outlook and said it would cut about 170 jobs over the next 18 months. Clorox also indicated that recent price increases would stick as the company tries to cut costs and boost margins.
The maker of Brita water filters and Glad bags said profit fell to $86 million, or 62 cents per share. That topped analysts' average earnings estimate of 57 cents per share. A year ago, Clorox earned $92 million, or 65 cents per share.
Revenue rose nearly 3 percent to $1.22 billion from $1.19 billion last year. Analysts polled by Thomson Reuters, on average, expected a profit of $1.24 billion.
The company said price increases partly offset lower-than-expected shipments.
Jefferies & Co. analyst Douglas M. Lane, who rates the stock "Buy," said North American revenue was weak, but international sales were better than expected. International sales volume rose 4 percent and North America volume fell 2 percent. The North American volume decline was due to lower demand for its auto-care products, its exit from the private-label food bags business and price increases for several products including Glad trash bags and Pine-Sol cleaner.
"Overall, the quarter was solid, and the outlook remains as expected, despite the difficult consumer environment," Lane wrote in a note to investors.
On a conference call with analysts, Chief Executive Don Knauss said the company has implemented more than 40 price increases over the past three years, and even though commodity costs have fallen considerably, Knauss said the price increases were here to stay. The only price increase that has been rolled back so far is the cost of Glad trash bags.
"I think we continue to expect that the majority of these price increases will stick," Knauss said on a conference call.
Clorox now expects total 2009 restructuring-related charges between $35 million and $37 million, up from previous guidance of $20 million to $25 million in charges primarily related to its home care manufacturing operations.
The additional charges are associated with the company's decision to cut 170 jobs, or 2 percent of its total work force, over the next 18 months.
"We anticipate that further positions will be reduced through attrition as we continue to tightly manage hiring," Knauss said.
Chief Financial Officer Dan Heinrich said Clorox's holiday shopping season was "one of the weakest on record" with soft consumer spending and higher commodity costs.
"During the last two quarters, we've experienced the most significant commodity and diesel cost increases in the company's history," Heinrich said.
Looking forward, however, Heinrich said gross margins will benefit from significant price declines in key commodities, especially resin, which is used to make plastics. Heinrich anticipates full-year commodity and diesel cost increases of about $140 million to $150 million, down from a previous outlook of about $150 million to $170 million.
"With lower commodity cost increases, higher cost savings, lower incentive compensation accruals and the benefit from price increases, the vast majority of which are anticipated to stick, we now anticipate about 50 to 100 basis points (0.5 to 1 percentage point) of gross margin expansion for the full fiscal year," Heinrich said.
Clorox now expects 2009 sales to grow 3 percent to 5 percent, rather than between 4 percent and 6 percent. It affirmed its 2009 earnings guidance of $3.60 to $3.75 per share, while analysts expect a profit of $3.72 per share.
Heinrich said the company will offer its initial financial outlook for fiscal year 2010 on its third-quarter earnings call in May.
Shares rose 88 cents to close at $52.70.
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AP Business Writer Mae Anderson in New York contributed to this story.
(This version CORRECTS 10th graf to clarify that job cuts are not part of consolidation of home-care manufacturing operations.)
